Bloomberg Navigator for NAV Oversight and Contingency

Across the asset management industry, structural margin compression, and a stubborn cost base are reshaping strategic and operational priorities. Competition on fees, rapidly changing investor preferences, technology-led innovations, and onerous compliance requirements are demanding that firms focus on core competence and achieve lean and efficient operating models. The clearest reaction by investment management industry has been to outsource more of its value chain.

As asset managers prioritize core activities and outsource an increasing number of operational and technological processes, relationships between institutions and their service providers are broadening.

Institutions are under increasing pressure to balance their ultimate fiduciary, regulatory, and legal responsibilities with their desire to minimize cost and meet the challenging competitive and strategic pressures of the industry.With dependencies on outsourcing partners who are central to crucial operational processes, asset management executives, boards, risk, and operational staff need established oversight processes and contingency plans as part of their overall strategy.

From a regulator’s perspective, investor critical activities such as fund accounting and NAV reporting represent investor protection and systemic risk mitigation imperatives. They now expect (and require) the investment industry to show ongoing readiness and resilience for these imperatives. Of particular importance is oversight and contingency planning for self-administered and outsourced NAV production, which involves a complex set of daily processes; we have seen operational issues or failures around NAV reporting result in regulatory fines, increased scrutiny, and reputational harm. In today’s rapidly changing world, as firms are dealing with the sudden Covid-19 induced virtual office, contingency planning around creating a daily NAV is in the spotlight.

We have seen multiple models to address and institutionalize the NAV process that incorporate greater transparency and automation. In this briefing note, we look at the recently announced Bloomberg and Temenos partnership that created a Software as a Service approach to independently confirming the NAV with an oversight tool, and a means of reconstructing a NAV in the case of an operational or business failure on the part of a service provider.